Use of Drones for Insurance Claims Adjusting
As reported recently, nearly all major home insurance companies are now either considering or are now using drone technology to conduct insurance inspections and to process claims. Travelers, for example, now uses drones to conduct inspections in more than 30 states. Under Louisiana law, drone-conducted inspections are lawful, but some caution should be exercised.
Advantages of Drones
There are many advantages to using the new drone technology. First and foremost, it saves time and money. A normal human adjustor might take several hours to inspect a roof damaged by a spring storm. By contrast, a drone can take the necessary photographs in as little as 20 minutes. It also reduces possible injuries to the adjusters who can avoid ladders and falling risks.
Drone-conducted inspections also result in quicker processing and payouts to homeowners. The linked article from USA Today reports that it typically took Allstate 11 days to issue a repair estimate with a human-conducted roof examination, but only 4.5 days via a drone-conducted inspection. This helps with customer satisfaction which, in turn, aids in market-share retention.
Disadvantages of Drones
Under some circumstances, drone-conducted inspections will not show the true extent of the property damage. From a technical standpoint, the photos are quite excellent. Special lenses can even show water incursion and other damage based on thermal variations and related data that might be missed even by human examination. But, for now, drones do not physically manipulate the damaged shingles or wood or other roofing materials. As such, the drone photos may miss repair issues and structural concerns that are hidden under the surface.
The main business and legal risk, then, is that the homeowner or business-owner might claim that the drone-conducted inspection is not fair. This could lead to potential bad faith litigation.
However, this may be a short-term problem. Drone technology is advancing quickly. Some drones already have arms that can be manipulated, but the cost is prohibitive for now. As costs decrease, future drones may allow an adjuster to conduct a complete roof inspection — including shifting and sifting through the debris — from the safety of the ground.
One other potential disadvantage is the need for two-person teams with separate licensures for inspections. In most jurisdictions, insurance adjusters need some form of licensure or certification. As discussed below, drone operation also requires licensure. This is also likely a short-term problem.
Potential Legal Issues
Vis a vis the homeowner, the most obvious potential legal issue involves cases where the homeowner refuses to allow the drone-inspection but the insurance carrier refuses to conduct a human inspection. Will that constitute bad faith on the part of the insurance company? Likely not, depending on the specifics of the case. Where an insurance company can show that a new technique or technology provides substantially the same benefits to the insured, then courts will be unlikely to find bad faith. This is even more true where the new technology significantly enhances safety as is the case with drones.
Similar issues may arise if new provisions are inserted in homeowners’ policies. Again, given the enhanced safety provided by drone-conducted inspections and given the substantial similarity in results, it is unlikely that courts would strike down provisions requiring drone-conducted inspections.
In the opposite direction, what if homeowners begin to insist upon use of the special lenses and other spectrographic instruments? It is unclear how courts might resolve these types of issues. The best solution here might be premium surcharges and/or policy exclusions.
What Should You do?
- Get Consent: Under Louisiana law, if conducted without a homeowner’s consent and under other circumstances, drone surveillance can be punished as criminal trespass. As such, absent provisions in the insurance policy, an insurance carrier should obtain a written consent from the homeowner prior to conducting the drone inspection.
- Update Company Policies and Procedures: There are several broad areas of concern with drone use and insurance companies needs new policies and procedures to handle them. Among the issues:
- Licensure: Be certain of the licensure and qualifications of your remote flight operators. All remote flight operators must be licensed under rules established by the Federal Aviation Administration (“FAA”). Update your company policies and procedures to require FAA licensure compliance.
- Flight Regulations: The FAA also requires that drone use be limited to flight during the day, within line-of-sight, under 400 feet, at or below 100 mph, not flown over people, and not flown from a moving vehicle. Company policies and procedures should be put in place that follow these regulations, at a minimum. However, consider stricter rules. The drones tend to be noisy, so an insurer should contemplate the use of drones during regular business hours.
- Hazard Barriers/Crowd Control: Drones are interesting new devices and small crowds have been known to gather to watch a drone being used. Company policies and procedures should be written to ensure homeowner and crowd safety and also the safety of the adjustor where the drone itself is operated by someone else. For example, areas of the lawn being used by the operator should be roped off (or, for increased safety, the whole lawn).
- Rules Regarding Inadvertent Surveillance: Your policies and procedures should attempt to prevent inadvertent surveillance. As an example, you must avoid the remote flight operator accidentally photographing the homeowner taking a shower as the drone rises to the roof. Operating procedures should be in place to avoid that (e.g., maintaining the camera in the “off” position until above the roof). Similarly, inadvertent surveillance of neighbors should be avoided (e.g., rules about the camera angle and placement).
- Warning Signals on the Drone Itself: Consider company rules and regulations for the drone itself such as all drones should be painted fluorescent orange or green or have blinking lights to help “warn” those nearby that a camera is being used. This can help avoid inadvertent surveillance and/or provide a duty-of-care defense.
- Vendor or Service Agreements: You are likely hiring an independent drone company to conduct the drone inspections. If so, the vendor/service agreements should cover the issues raised above and provide sufficient indemnifications.
- Update Company Insurance: Drone use can be dangerous. The drones are heavy and could be deadly if they fall from the air. In this respect, make sure to update your company’s insurance to cover these types of accidents even if insurance is provided through a vendor or service contract.
Contact an Experienced Insurance Defense Lawyer
As can be seen, new technology creates new legal issues. An experienced Louisiana insurance defense lawyer can help if you have any questions or want more information. Contact Kristin M. Lausten at 504.377.6585 or via email at firstname.lastname@example.org.
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Kristin M. Lausten
This article is provided as an educational service for general informational purposes only. The material does not constitute legal advice or rendering of professional services.